Stop, Sina!

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Chinese Internet star Sina (Nasdaq: SINA) reported Q1 2006 earnings late Tuesday afternoon, but you wouldn't know it from looking at the stock's closing prices on Tuesday and Wednesday: They differ by just a nickel.

Most companies' stock prices zigzag more than that even on uneventful days, much less one of the four biggest news days of the year. So what's all the fuss about -- or not about? Let's find out.

First, Sina's got a new boss. CEO Yan Wang has been "promoted out of a job," becoming vice chairman of Sina's board of directors. Current President and CFO Charles Chao will be taking Wang's place as CEO. With Chao's seven years' experience working for Sina, Wang staying around to lend advice as needed, and the strong backing of the board, which cited Chao's "proven leadership and execution ability over the last seven years," the new boss should do just fine.

In earnings, sales beat estimates with a 2% increase; analysts had predicted flat sales. Once again, advertising played the starring role here, rising 33% year over year, and all other revenue streams played the laggard, actually declining 16% this quarter. Profits per share came in at $0.12 under Generally accepted accounting principles (GAAP). If you prefer Wall Street-speak, pro forma profits were $0.16 per share, versus the $0.15 that analysts were projecting.

Stop, Sina!
And here's where I explain the "Stop, Sina!" title to this column. There's something interesting about the extra penny Sina "earned" this quarter. As explained in the earnings report, Sina gave itself an extra penny per share in income when it "changed the estimated useful lives of these computer equipments from three years to four years" this quarter, reducing its depreciation expenses by $0.6 million. To quote the Church Lady, "How convenient."

Regardless of why the extra penny was added, it doesn't appear to have swayed investors. After all, the price is down a whole nickel per share since the news came out.

Now, go
Moving forward again, Sina backed up analysts' revenue estimates for Q2 2006, predicting about $47.5 million to $49.5 million, in line with the $48.6 million that Wall Street was expecting. The company further advised that advertising sales will finally become its biggest revenue stream next quarter, at approximately $26.5 million.

China currently has the world's fastest-growing advertising market, but what is Sina doing to ensure that its now-largest-division will remain profitable? As big as the market is, rivals Baidu.com (Nasdaq: BIDU) and Sohu.com (Nasdaq: SOHU) will certainly want their share. To fend off these rivals, Sina linked up with Google (Nasdaq: GOOG) in 2003, forging an exclusive partnership to use Google's search technology on Sina's portal. Judging from Sina's performance in recent quarters, the partnership is paying off in spades.

Sina is a Motley Fool Stock Advisor pick. To see which other stocks David and Tom Gardner believe are poised for greatness, sign up for a free 30-day guest pass.

Fool contributor Rich Smith does not own shares of any company mentioned above.